Developing an Exit Strategy

The right way to develop an exit strategy is to plan for the future, but start maximising your value now. Most business owners operate their business to minimise tax, however this can have serious implications when it comes time to sell and your profit is not showing at the level it should be. This is just one of the many steps we will discuss with you when it comes to planning an effective exit strategy for your business.

Waiting until you want to sell is not the time to begin planning an exit strategy. Even though the term ‘exit strategy’ almost sounds like you are thinking of selling tomorrow, in reality it is simply planning for an eventual sale, whether it is one or five years down the track.

Your exit strategy will need to take into account your requirements for the future. Do you want to purchase another business with the funds from the sale of your current one, or are you looking to retire? Whatever your decisions for selling are, an effective exit strategy means you can start planning properly now, and not leave it all to chance, at some point in the future.

Another great reason to put into place an effective exit strategy is that buyers of successful businesses pay not only for the assets of the business, but also for profit that may be generated in the future. Depending on the type of business you have, this could be a considerable percentage of the sale price. Therefore it is highly important to begin maintaining excellent record keeping if you are not already doing so.

An exit strategy covers many areas, not only financial. You will need to know what is going to happen with all areas of the business. Are you grooming a successor to take over your current role? Are you selling to a colleague or is the sale part of a buyout? How much money do you expect from the sale? Is there anything else you could be doing in the meantime to increase your business sale price?

All of these questions and any others you might have will all be answered when you book an appointment with one of our Hallmark Business Brokers to discuss implementing an effective exit strategy for your business.

Managing Your Intangible Assets

It is vital that you maximise your intangible assets as well as your tangible ones to get the best selling price for your business.

Develop Key Employees

Buyers will not pay a premium for a business in which the income is reliant on the owner. The reason for this of course, is once you leave, so does the income! It is very important that you have secure, long-term employees in place that the new owner is comfortable with. Depending of the length of their employment and their roles within the business, their workplace contracts could even be part of the negotiating process. If you do not have key staff in place, or if you take on the greater operating roles within your business, part of the exit strategy we put into place for you will include involving your key staff members in more operational roles.

Build Your Business Relationships

Your reputation with your customers, as well as your business relationships with suppliers, all drive your bottom line. If everything else is already in place, good relationships in this area will only serve to increase the value of your business.

Review Your Assets & Inventory

Do you have heavy machinery sitting around that is barely used? Sell or dispose of your unused business assets! This will increase the value of your business in two ways. The first is with increased cash flow from the sale of an unwanted asset, the second is by lessening your business outgoings, particularly if the item in question is under lease.

Get It Down On Paper

Financial statements aren’t the only records you need to keep to get the maximum sales price for your business. Make sure your business has operations procedures, employee training procedures and any other business processes documented. Many business owners fail to do this because they learn and implement everything they need as they go. A new owner will need to know all of this information upfront and proper documentation will make them feel much more at ease about their purchase.

Stick To Your Niche (Do What You Do Best)

You don’t have to be all things to all people to get the best sale price. In fact, sometimes it can be intimidating to a potential owner if there are too many fingers in too many pies! If you stick with what you know best and try to implement some barriers to entry from other competitors within your market, this will do far more for your sale price than being the business that does everything.

Your intangible assets can assist you in achieving your sale price in a way that your financial statements cannot. If you are thinking of selling your business either now or in the future, you will need to put in place an effective exit strategy to ensure that all of these factors (which are of great importance to the buyer) are met.

You only get one chance at selling your business, so let Hallmark Business Sales assist you to get it right!